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Options When Consolidating Payday Loans

July 5, 2021 By MelissaB Leave a Comment

Payday loans can trap borrowers in a vicious cycle. Because you’re short on cash and/or have bad credit, you borrow money from a payday lender. That money is usually due back in a short amount of time (often just two weeks). Yet, because of high fees and interest rates on the loan, you must pay back much more than you originally borrowed. If you’re unable to repay the loan in time, you can always roll the amount over into a new loan. This is how the payday loan trap begins. However, you can avoid or escape the payday loan trip by utilizing payday loans consolidation options.

Options When Consolidating Payday Loans

You don’t have to stay stuck in the payday loan trap. Instead, utilize these options to consolidate your payday loans.

Get a 0% APR Credit Card

If you still have good credit, consider applying for a 0% APR credit card. These types of credit cards will allow you to transfer your payday loan balance onto the credit card. Most of these types of cards charge a transfer fee of three to five percent. Then, you have twelve to eighteen months of 0% APR, which means every payment you make goes on the balance, allowing you to pay it off more quickly. After the introductory APR expires, you will pay the stated interest rate on the rest of your balance.

Get a PALs Loan

Another option offered by certain federal credit unions around the country is Payday Alternative Loans. These loans are available for $200 to $1,000 and are to be paid back in full in one to six months.

To qualify for a PALs loan, you must be a member of the credit union for at least one month. The credit union is especially interested in your income rather than your credit score, making these loans easier to qualify for than a 0% APR credit card. In addition, these loans can help build and improve your credit score.

Borrow from Friends or Family

Payday Loans Consolidation Options — Photo by Rajiv Perera on Unsplash

If you don’t qualify for either option already stated, consider borrowing from friends or family. However, if you choose this option, recognize that borrowing money can often ruin relationships. To keep this from happening, write out a contract stating how much you’re borrowing and when you will pay it back. For good faith, state how much you will pay weekly or monthly. If you want, you could even offer to pay back the loan with a bit of interest.

Then, dedicate yourself to paying off this loan as quickly as possible. Nothing ruins a relationship faster than someone who doesn’t pay back a loan to a family member or friend.

Final Thoughts

Payday loans seem like an easy, quick way to borrow money, but they can trap you in an endless cycle of debt. To break that cycle, utilize one of these payday loans consolidation options so you can stop paying so much in interest and pay off what you owe.

Are Personal Loans Ever Right for You?

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What Is Required for a Hard Money Loan?

June 29, 2020 By MelissaB Leave a Comment

When most people buy a house, they take out a loan with a traditional lender. However, individuals who are interested in buying run down houses to fix them up to then sell or rent rarely qualify for traditional mortgages. Instead, they seek hard money loans, which have short terms and give the investor more flexibility than a traditional loan. Before you first enter the home flipping business, it’s important to know what is required for a hard money loan.

What Is Required for a Hard Money Loan?

Of course, each lender will have their own requirements, but in general, there are three criteria that are most important when trying to secure this type of loan. Not surprisingly, many of the requirements circle around cash on hand and experience.

Down Payment

Most banks require a 25 to 30% down payment for residential properties.

In general, a successful hard money loan fit this formula. Consider the estimated after repairs retail value of the property. Let say you expect to sell the property for $250,000 when you’re done fixing it up. Maybe you purchased the property for $100,000. You expect to complete the repairs for $60,000, and you also want to borrow enough to cover closing costs of, say, $15,000. Your total comes to $175,000, or 70% of the expected value of the property. If you use this formula, you will likely qualify for a hard money loan.

Cash Available

What Is Required for a Hard Money Loan? — Photo by Shane on Unsplash

Since hard money loans are inherently risky, the lender will take a close look at your cash reserves. You will need substantial cash reserves to use during the renovation process to pay for things like HOA dues, interest payments on the hard money loan, insurance on the property, and other expenses.

The more cash you have available, the more likely you are to qualify for the loan.

Exit Strategy

The last thing the bank will consider is your exit strategy. Most hard money loans only have terms of six to 18 months, so you must have a plan for what to do when the loan term ends.

For private properties, there are two basic exit strategies:

Sell

The most typical option is to immediately sell the property when you’re done renovating it. You settle the hard money loan, get your profit, and are free to go on to invest in the next property. Some investors go a step further and get a cash out refinance so they then have even more cash on hand to invest in the next property.

Rent

Another option is to renovate the property, then rent it. When you rent it, the property is now making money. You’ll be able to go to a traditional mortgage lender and get a traditional mortgage in place of your hard money loan.

Final Thoughts

If you are considering going into the real estate business, you must first learn what is required for a hard money loan. When you meet the requirements, you’ll be able to secure your first loan. After you have amassed more experience and cash, you will find that hard money loans are easier to obtain, and you’ll be able to grow your business.

How to Make a Refinance Appraisal Checklist

May 4, 2020 By MelissaB Leave a Comment

If you’re looking to refinance your home, you will likely need to have an appraisal as it’s the first step to putting an official price value on your home. You may not know where to start, but learning how to make a refinance appraisal checklist is the perfect place. Once you do this, you can work on improving your property for the appraisal.

How to Make a Refinance Appraisal Checklist

My husband and I recently called our real estate agent because we wanted to refinance our house. She gave us several pieces of advice to prepare for an appraisal.

Get Rid of the Clutter

How to Make a Refinance Appraisal Checklist — Photo by Minh Pham on Unsplash

Most Americans have at least some clutter. Your job is to get rid of the clutter in preparation for the appraisal, much the same way you would if you were preparing your home for sale. Our real estate agent specifically said, “Make your house show ready.” However, she also added that in general we didn’t have to make places like closets pristine for an appraisal.

Make a List of Improvements to the Home

Since you’ve lived in your home, what improvements have you made? Make sure you have a list of what you’ve done and when you did it. Since we moved in, we’ve replaced the water heater, the HVAC, and two bedrooms’ flooring. Big ticket items like replacing the HVAC system help the appraiser increase the value of your home.

Make Easy Cosmetic Fixes

When you’re in your house every day, you tend not to notice the little things like the paint that is chipped off your kitchen cabinets or the hole in the dry wall where your child’s bedroom door handle hit the wall. You might not notice dingy floorboards or dusty door hinges, but the appraiser will.

These items don’t cost much to fix, but they can increase the value of your home by creating the appearance that you care for your home and that it is well-maintained.

Look at the Curb Appeal

How does your house look on the outside? Is the paint fresh or the siding clean? Is the lawn mowed? Nicely landscaped? Or, do you have piles of clutter outside?

A tree fell in our backyard during a windstorm, and while we had taken care of most of it, the trunk of it still lay across our backyard. The real estate agent was adamant that we must take care of that before the appraiser came.

Get Comps for the Neighborhood

How much do comparable houses in your neighborhood sell for? Having this information gives you an idea of how much your house would likely sell for. Making this information easily accessible to the appraiser also gives him a starting point.

Our real estate agent offered to put together a list of comps for us. However, we didn’t need her to. When we put in our application for refinance, the comps in our area were high enough and our mortgage low enough, that the bank didn’t even require an appraisal.

Final Thoughts

Now is a good time to consider a refinance based on the market. If you’re wondering how to get started, hopefully this helps you learn how to make a refinance appraisal checklist.